Buying a flat is one of the biggest financial decisions most people make. With the recent changes in GST (“GST 2.0”) now in effect from September 22, 2025, the tax structure on goods and services has been rationalized. This blog helps you understand how these changes may affect flat (apartment) prices, especially for under-construction properties, with a realistic cost breakdown.
What Changed in GST from September 2025
The GST Council reduced the number of slabs and moved toward a simplified structure: 5 % for merit/essential goods and services, 18 % as the standard rate, and a 40 % slab for sin/luxury items. (This reform came into force on September 22, 2025.)
Importantly for real estate, several key construction input materials saw rate cuts. For instance, items like cement had their slab reduced from higher levels (like 28 %) down to 18 %.
These input rate reductions aim to lower construction costs and reduce cascading taxes in the supply chain.
The government’s press release confirms these changes are intended as relief for households, farmers, and businesses.
(Source: Press Information Bureau, “GST Reforms 2025: Relief for Common Man, Boost for Businesses”)
What Are the Current GST Rates for Flats / Properties (2025)
| Scenario / Property Type | GST Rate | Input Tax Credit (ITC) | Comments |
|---|---|---|---|
| Under-construction affordable housing | 1 % | Not allowed | For projects meeting the criteria of affordable housing (carpet area, price ceilings) |
| Under-construction regular residential (non-affordable) | 5 % | Not allowed | Standard residential projects that do not qualify as “affordable” |
| Commercial properties (shops, offices) under construction | 12 % | Allowed | Commercial real estate can utilize ITC, but the rate may change under new regime |
| Ready-to-move / completed / resale properties | 0 % (exempt) | Not applicable | Once a project is complete (occupancy certificate issued), GST is not applicable |
| Land sale / plots | 0 % | Not applicable | Sale of land / plots is not a supply of goods or services under GST rules |
(Sources: Housing.com “GST rate in 2025 …”, Razorpay Learn “GST on Flat Purchase 2025”, IndiaLawOffices “GST on Real Estate”)
A few clarifications:
The GST is applicable only on the “under-construction” portion of the property (i.e. the construction cost component), not on the land portion.
Developers cannot claim input tax credit (ITC) for residential projects falling under the 1% or 5% scheme.
For ongoing projects started before certain cut-off dates, some developers might have had the option to choose a different scheme (e.g. 12% with ITC) and pass the benefit to buyers; such legacy cases are complex.
Real Cost Breakdown: Example Calculation
Let’s walk through a practical example to see how much GST you might pay, and how much savings you could see if developers pass on input cost reductions.
Assumptions (Illustrative)
Total flat selling price (including land + construction) = ₹1,20,00,000
Portion attributable to land = 30 % → ₹36,00,000 (non-taxable)
Portion attributable to construction / structure = ₹84,00,000 (taxable base)
The flat is non-affordable residential, so GST @ 5 % applies.
After GST 2.0, due to rate cuts in construction inputs, the developer manages to reduce cost by 3 % on that construction portion (i.e. ₹84,00,000 × 3 % = ₹2,52,000 cost saving)
Calculation Before Cost Reduction
Taxable base = ₹84,00,000
GST @ 5% = ₹4,20,000
Total paid by buyer = ₹84,00,000 + ₹4,20,000 + ₹36,00,000 = ₹1,24,20,000
After Cost Reduction & Passing Benefit
New construction cost assumed by developer = ₹84,00,000 – ₹2,52,000 = ₹81,48,000
GST @ 5% on that = ₹4,07,400
Total to buyer = ₹81,48,000 + ₹4,07,400 + ₹36,00,000 = ₹1,21,55,400
Net saving to buyer = ₹1,24,20,000 – ₹1,21,55,400 = ₹2,64,600
As a percentage of original total = ~2.13 %.
That shows the benefit is modest unless the entire cost advantage is passed on.
If the flat had qualified as affordable housing (1 % GST):
GST = 1 % of taxable base (₹84,00,000) = ₹84,000
After cost reduction: taxable base = ₹81,48,000 → GST = ₹81,480
Saving is more pronounced in tax burden, making a bigger difference for buyers in that segment.
What Determines How Much You Actually Benefit
Whether the developer passes on cost savings: If they retain the benefit as margin, buyer doesn’t gain.
Proportion of land vs construction: Regions with higher land cost will see smaller GST impact.
State-level charges: Stamp duty, registration, local development charges are outside GST. These often are large components.
Project scale & efficiencies: Larger projects might realize bigger savings due to bulk procurement, better logistics.
Eligibility criteria & compliance: For a flat to be “affordable housing,” it must meet certain carpet area and price ceilings.
What the Experts & Analysts Are Saying
According to articles on real estate portals, many analysts expect that input cost reductions (e.g. in cement) could translate to ~3–5 % lower construction cost, which may reduce flat prices by around 1 % to 1.5 % if passed on fully.
Some real estate analysts believe that the new GST slab rationalization (5% and 18%) will benefit developers via lower tax burden on inputs, and may gradually lead to better affordability.
However, multiple voices emphasize that transparency and accountability from builders will be key — whether they will reflect cost benefits in sale prices or retain margins.
Key Takeaways for Homebuyers
GST is now simpler but still relevant — the new two-slab structure helps reduce complexity, but the 1% and 5% rates continue to apply for under-construction residential properties after September 2025.
Always insist on a GST cost breakup — ask your builder to show how the cost and GST are structured, and whether any cost reductions are being passed to you.
Check if your flat qualifies as “affordable housing” — the lower GST rate (1%) can make a meaningful difference.
Don’t ignore non-GST costs — stamp duty, registration, local charges often dominate the cost burden.
Timing matters — properties nearing completion / OC stage may shift from being taxed to being exempt, impacting your cost.
If you like, I can convert this into a ready-to-publish blog with headings, subheadings, infographic ideas, and a local (Pune / Maharashtra) version. Want me to prepare that next?
Sources & References
“GST Reforms 2025: Relief for Common Man, Boost for Businesses” — Press Information Bureau
“GST rate in 2025 … impact on real estate” — Housing.com
“GST on Flat Purchase: Rules, Rates, and Implications in 2025” — Razorpay Learn
“GST on Real Estate: The IndiaLawOffices Guide” — IndiaLawOffices
“GST 2.0 Guide 2025: New Tax Slabs for Home Construction” — JK Cement blog
“New GST Rates to Transform Indian Real Estate Market” — GSTLearn
